SEC v. John A. Mattera, Bradford Van Siclen, The Praetorian Global Fund, et al., (United States District Court for the Southern District of New York, Civil Action No. 11-CV-8323)

The Securities and Exchange Commission announced that on November 17, 2011, it filed an emergency civil enforcement action to halt defendants’ fraudulent sale of securities of investment vehicles that claim to own coveted shares of companies like Facebook and Groupon that are expected to conduct an initial public offering soon. Judge Kevin Castel of the United States District Court for the Southern District of New York has issued a temporary restraining order that, among other things, freezes the assets of multiple defendants and relief defendants.

According to the Commission’s complaint, Florida resident John A. Mattera and several other individuals carried out the fraud using a newly-minted hedge fund named The Praetorian Global Fund. They falsely claimed that the fund and affiliated Praetorian entities owned shares worth tens of millions of dollars in privately-held companies that were expected to soon hold an initial public offering, including Facebook, Groupon, and others. Mattera and others solicited investments by, among other things, telling investors that their funds would be safely held in escrow accounts.

In reality, according to the SEC’s complaint filed in federal court in Manhattan, Mattera and his confederates never owned the promised pre-IPO shares in these companies. The purported escrow service, headed by defendant John R. Arnold of Florida, merely transferred investor funds to personal accounts controlled by Mattera and Arnold. After Arnold took a cut of the money for himself, he released the money to entities controlled by Mattera, who misappropriated investors’ funds for private jets, luxury cars, fine art, jewelry, and other personal uses. Mattera also transferred money to his mother Ann Mattera and his wife Lan Phan. They are named as relief defendants in the SEC’s complaint for the purpose of reclaiming investor funds unrightfully in their possession.

The SEC’s complaint charges Mattera, Bradford Van Siclen, the Praetorian Fund, Praetorian G Power I LLC, Praetorian G Power II LLC, Praetorian G IV, Praetorian G Power V LLC, and Praetorian G Power VI LLC, Arnold, and First American Service Transmittals Inc. with violations, or aiding and abetting violations of, Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5. The complaint further charges Mattera, Van Siclen, the Praetorian G entities, Joseph Almazon, Spartan Capital Partners, and David Howard with violating Sections 5(a) and 5(c) of the Securities Act by engaging in the unregistered offering of securities, and Almazon and Spartan Capital with violations of Section 15(a) of the Exchange Act by acting as unregistered brokers.

The SEC’s investigation, which is continuing, has been conducted by Karen Willenken, Michael Osnato, Richard Needham, and Yvette Quinteros of the New York Regional Office. The SEC’s litigation effort will be led by Preethi Krishnamurthy.

On November 16, 2011, the U.S. Attorney’s Office for the Southern District of New York filed a criminal complaint charging Mattera with securities fraud, wire fraud and money laundering. The SEC thanks the U.S. Attorney’s Office for the Southern District of New York, Internal Revenue Service, and Swiss Financial Market Supervisory Authority for their assistance in this matter.